On the go: Stephen Timms, chair of the Work and Pensions Committee, has warned that transfer rules are not working and must be changed if the industry is to put a stop to pension scams.
At the second reading of the pension schemes bill on Wednesday, Mr Timms told the House of Commons that savers should not be entitled to their right of transfer in cases where the receiving scheme or destination is listed on the Financial Conduct Authority’s warning list.
He pushed for the bill to allow trustees to refuse to make a transfer in cases where red flags are raised and a scam is suspected.
Under current rules, trustees have a legal duty to carry out a transfer of a saver’s cash equivalent transfer value within a six-month deadline, and if they refuse they could be at risk of legal action.
In 2016, Royal London was successfully taken to court by a scheme member after it identified and blocked a suspicious transfer request. Lawyers at the time warned that the High Court ruling had “hamstrung” pension providers who blocked transfers if they thought the receiving scheme looked suspicious.
Mr Timms argued that this had to be changed so that providers and trustees could put a stop to scams without the fear of being taken to court.
As Pensions Expert reported, the Labour MP tabled an amendment to the pension schemes bill for the statutory right to transfer to be removed where a scam is suspected, which was drafted by the Pension Scams Industry Group.
He said: “If the trustees of a scheme know that a particular transfer is going to a company that is on the warning list, they should surely not have a legal obligation, as they do at the moment and will still have under the bill, to hand the money over to crooks if the saver has taken advice but still, despite that advice, wants to go ahead.
“If the receiving firm is above board, it must show that to the FCA and get itself off the warning list.”
This proposed rule change has gathered support from other MPs, as well as providers and other pensions industry groups.
Guy Opperman, minister for pensions and financial inclusion, said he was “keen” to ensure this change and to address the issues raised by Mr Timms.
Meanwhile, the Pensions Management Institute and the Association of British Insurers have also voiced concerns over the current rules.
This article originally appeared on ftadviser.com
